The Motley Fool

Why the Cash Converters share price rocketed 43% higher today

The best performer on the All Ordinaries index on Monday has been the Cash Converters International Ltd (ASX: CCV) share price.

The retail and personal loans company’s shares rocketed as much as 43% higher this morning to 21.5 cents.

They have since dropped back a touch, but are still up 27% at 19 cents at the time of writing.

Why is the Cash Converters share price on fire today?

Investors have been scrambling to buy the company’s shares after it provided an update on the Lynch class action.

This class action, which commenced over four years ago, was on behalf of Queensland borrowers who took out personal loans from the company’s subsidiaries between 2009 and 2013.

It related largely to excessive brokerage fees that were charged to vulnerable customers.

This morning the company announced that it has settled the class action and a Deed of Settlement has been exchanged by the parties.

What are the terms?

According to the release, the Lynch Settlement will see Cash Converters pay $42.5 million into a fund for distribution to members of the class action.

The payment will be made in two tranches. The first tranche of $32.5 million is to be paid within 21 days of execution of the deed of settlement. This payment will be made from its available cash.

After which, the second tranche of $10 million is to be paid on or before September 30 2020. 

The company advised that it “is pleased to bring this litigation to a close.” It also explained that the settlement “is without any admission of liability by Cash Converters.” The Lynch Settlement remains subject to court approval.

Should you invest?

I believe this was the last remaining class action the company was facing. So this is a positive day for it and will allow management to focus purely on the future at long last.

However, I wouldn’t be in a rush to invest just yet. I’d like to see a couple of years of solid profit growth before I’d consider an investment.

In the meantime, I see more value in retailers such as Accent Group Ltd (ASX: AX1) and Super Retail Group Ltd (ASX: SUL).

Alternatively, these highly rated ASX dividend shares could provide you with strong gains and a source of income. 

Top 3 Dividend Shares To Buy For 2020

When Edward Vesely -- our resident dividend expert -- has a stock tip, it can pay to listen. With huge winners like Dicker Data (up 147%) and Collins Food (up 105%) under his belt, Edward is building an enviable following amongst investors that are planning for retirement.

In a brand new report, Edward has just revealed what he believes are the 3 best dividend stocks for income-hungry investors to buy now. All 3 stocks are paying growing fully franked dividends giving you the opportunity to combine capital appreciation with attractive dividend yields.

Best of all, Edward’s “Top 3 Dividend Shares To Buy For 2020” report is totally free to all Motley Fool readers.

Click here now to access this free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Accent Group. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!